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Apple Pays $60 million for iPad™ in China

Apple reached into its deep pockets and pulled out a cool $60 million to pay bankrupt Chinese manufacturer Proview Holdings $60 million for the iPad trademark in China. It turns out Apple had hired a U.K. consultant to buy up rights through IP Application Development Ltd., the U.K. company set up by Apple to acquire the world wide trademarks for the iPad trademark.

Apple had originally bought the global rights to the “iPad” from Proview's Taiwanese affiliate for $55,000 (£35,000), and apparently believed those rights included all of mainland China. Proview had the mark registered in China since 2000. Proview claims Apple also duped them when Apple claimed iPad was an abbreviation for the U.K. holding company (IPADL). Apple’s representatives may have been equally out witted, since the Chinese firm had argued that its affiliate did not have the rights to sell the iPad name rights for China, one of the fastest-growing markets for Apple's products. Clearly there was some legal merit to this claim.

While few companies can cough up $60 million for one trademark, it’s a valuable lesson and good reminder for all brand owners: When establishing rights in a new brand, make certain you perform necessary searches, and establish or acquire the legal rights to use and register the mark in the territories in which products will be sold. This is most important in foreign countries, where unlike the U.S., rights belong to the first to register, not the first to use the mark.

Secondly, due diligence in any transaction to purchase assets of another company is required, namely to ask for proof that the Seller owns what they say they own, and that they have the legal right to transfer what they say they can transfer. Apple’s reps seem to have overlooked this basic rule.